CRUDE OIL fell by more than $4 a barrel in New York after Saudi Arabia's oil minister, Ali al-Naimi, called for a meeting of oil producing and consuming nations to discuss how to deal with record prices.
"The increase in prices isn't justified in terms of market fundamentals," the Saudi government said yesterday.
The statement from the information and culture minister, Iyad Madani, followed a cabinet meeting in Jeddah yesterday. It stopped short, however, of promising the increase in production requested by western leaders.
Oil climbed by $10.75 last Friday, its biggest one-day gain on record, because of a weakening dollar and threats of supply disruptions. Pump prices in the US passed $4 a gallon for the first time over the weekend.
Crude oil for July delivery fell $4.19, or 3 per cent, to $134.35 a barrel at the 2.30pm close of floor trading on the New York Mercantile Exchange. Futures, which reached a record $139.12 a barrel last Friday, are more than double the level of a year ago.
Brent crude oil for July settlement fell $3.90, or 2.8 per cent, to $133.79 a barrel on London's ICE Futures Europe exchange.
Although the price of a barrel of crude slipped slightly yesterday, governments all over the world have watched in alarm as the cost has soared, prompting protests from Europe to Indonesia. Many experts predict it will rise to $150 a barrel soon, driven by Middle East tension and futures speculation, bringing more pain to consumers already hit hard by a sharp rise in domestic fuel costs.
Saudi Arabia said yesterday it had increased production this month and has told all the oil companies it deals with that it is ready to provide them with additional supplies if needed.
Crude oil also fell as the dollar climbed against the euro for the first time in three days as US stock indices advanced. The falling dollar has spurred investors to purchase commodities as a hedge against the US currency's decline.
The dollar's drop has helped lead oil, gold and corn to records this year. The dollar increased by 0.7 per cent to $1.5662 per euro at 2.34pm in New York, from $1.5778 on Friday.
"The economic crisis in the US caused the dollar to drop sharply and the threats against Iran heightened geopolitical tensions," Opec president Chakib Khelil, said yesterday in Algiers, according to the state-run Algerie Presse Service.
"If it wasn't for these factors, the price of oil would probably be $70 a barrel; the depreciation of the dollar alone is adding $40." - (Bloomberg/Guardian service)
